Alaska takes next pipeline project step

RuthMantell

SAN FRANCISCO (MarketWatch) -- Alaska took its next step Wednesday toward bringing its vast North Slope natural gas reserves to the North American energy market, as the governor released a draft contract outlining the basic agreement between the state and the consortium of giant oil companies involved in the project.

The state would have a 20% ownership stake and contribute more than $4 billion to the $21 billion venture, while producers would contribute more than $16 billion. The project would transport approximately 51.1 trillion cubic feet of natural gas over the anticipated 35-year operating life of the project.

The draft, a 356-page document for the pipeline that could add $2 billion to $3 billion to the state's revenue annually, outlines the contract between Alaska and BP plc
BP, -0.55%
(BP), ConocoPhillips, and Exxon Mobil Corp.
XOM, -1.56%
The project would require 54 million construction man hours and 5 million to 6 million tons of steel.

The project is expected to produce 4 billion cubic feet of gas per day from Prudhoe Bay, Point Thomson and other western North Slope fields, ConocoPhillips
COP, -1.58%
noted in a statement Wednesday.

The pipeline, which could reach 3,600 miles, would help ease the supply crunch in the nation's natural gas market, which has seen prices soar to record-highs over the past year as demand for the clean-burning fuel outpaces supplies.

Following a public review process, the Legislature must approve the fiscal contract. The producers can begin project planning after legislative authorization.

The contracts elements include gas transmission pipelines; a gas treatment plant; a gas transportation mainline; a natural gas liquids processing plant; an Alaska to Alberta project; and an "Alberta to Lower 48 Project" that could export gas from Alberta, Canada to the contiguous United States.

Alaska has been lobbying hard to sell its gas to the Lower 48, aiming for production revenue, and, in turn, more energy from secure domestic reserves. The current contract, which could lead to 9,300 direct and indirect new jobs for Alaskans, provides $125 million for communities impacted by construction activities, according to the state.

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